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Money
Management Part 1 Accomplishing Goals through Money Management
Look back at your Long-term Plan. What item(s) did you select as the most important, those rated as 1s? You must now create an approach that will enable you to accomplish those goals. If you selected more than one item as a 1, then you need to have multiple tactics to accomplish different goals; for example, if you selected Savings and College Funds as your most important goals, you may realize after your capital won’t support multiple goals simultaneously. In this case, one objective must take priority.
Let’s go back to the Long-term Plan and re-write below the top three priorities and order them from most important to least important:
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Now, you may realize that you need to make changes to your Long-term Plan. If that’s the case, go back and re-rank items as necessary. Later, you’ll learn the subtle differences between financial necessities and financial desires, but for now, keep the Long-term Plan as you have developed it to this point.
Next, approximate the percentage of income that you believe you’ll need to apportion to the top three goals and write it next to the priority above. Without delving into a complex analysis, can you realistically afford to set aside this much of your income for these priorities? Listen to your instincts here; they are usually right.
Record your pre- and post-tax income this year:
Gross Income: ________________ Net Income: __________________. Gross income is what you earn before paying taxes such as federal, state, social security, etc. Net income is the amount you see on the paycheck, or what you get after all deductions are taken from your gross income. Because you can manage only the money that you have access to, it’s important to work here with the net, or take-home figure.
At this point, you are ready to estimate your income increase over the next five years, assuming your employer doesn’t change. If you are employed with a contract, such as many union workers are, this estimation should be fairly easy to make; otherwise, you may need to consult your human resource documentation, if available. It’s NOT critical to know this amount, but it does help if you can incorporate income changes: Annual net income in 1yr___________, 2yrs___________, 3yrs___________, 4yrs___________, 5yrs___________.
Finally, now that you may understand your income changes over the next five years, consider postponing some of the less important goals that you listed in your Long-term Plan, such as taking a vacation, to enable reaching your most important goals. If you do put off some of these other less-important goals, can you achieve your number-one priority? If not, consider some other adjustment that you can make that will enable you to reach these goals.
Prioritizing
Who doesn’t want it all, a great home, sports car, designer clothes, and more? It’s true, most people like the finer things in life, but the reality is that we can’t have those things that are not within our means. It’s easy to be tempted with offers of credit cards, no payments for two years, and so on; but you must work with what you have now because you will only build more debt if you buy into temptation.
All successful business managers want more capital, more employees, more equipment, but they all know that they are limited by their actual resources. These creative managers accomplish their goals through discipline and motivation, and you can too!
Money
Management Part 3
Debt Assessment Chart Download, Right Click "save as"
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